Lendlease industrial fund signs Australia-first renewable energy program for up to $20 million

4 March 2021

In a first for Australian industrial investment market, Lendlease’s Australian Prime Property Fund (APPF) Industrial has signed an agreement of up to $20 million value for a program to facilitate the use of solar and alternate clean energy technologies across its portfolio.

APPF Industrial has partnered with renewable energy fund Solar Bay to deliver solar systems, energy storage and renewables initiatives for its assets and tenants. The program aims to lower tenants’ energy costs and reduce the portfolio’s carbon footprint through green technology.

As part of the program, Solar Bay will install, operate and maintain solar photovoltaic systems on assets that qualify through Power Purchase Agreements. This approach to solar implementation provides a capital light strategy to install solar photovoltaic systems that benefits the fund, its tenants and the environment. 

While focused on solar, the program has the ability to support investment in alternative technologies, including battery storage, thermal chilled water storage, electricity demand management systems and alternative fuels.

Lendlease has a demonstrated track record in implementing market leading sustainability initiatives across its property portfolios. Its Australian funds have a commitment to be Net Zero Carbon by 2025 for Scope 1 and Scope 2, as well as powered by renewable energy by 2030. APPF Industrial recently ranked first in Australia and New Zealand for the industrial sector in the 2020 GRESB Real Estate Assessments1

APPF Industrial and Solar Bay negotiated the deal and period of exclusivity for the portfolio, with the strategic partnership opportunity brought to the fund by Hugh Gilbert of Colliers International.

Scott Mosely, Managing Director, Lendlease Funds Management said, “Interest from our tenants for solar energy solutions has been very strong and we expect the discounted electricity from the use of solar to provide significant financial and environmental benefits.”

 “This APPF Industrial solar initiative delivers on our commitment to ESG, as well as supporting tenants in meeting their own environmental commitments.”

 “As investors and managers seek to decarbonise their investments, we believe that   net zero carbon real estate will deliver long-term risk adjusted returns, attracting and retaining tenant and investment partners.”

Solar Bay, Investment Director, Andrew Archibald said, “The opportunity for on-site renewable energy solutions has never been greater. Industrial facilities are well placed due to their large floorplates, allowing for extensive on-site generation via rooftop solar. 

“When paired with battery storage, demand management, and the electrification of transport, the outcome is a competitive energy solution for both tenant operations and transport, with near-zero emissions. 

Solar Bay are delighted that Lendlease is taking such a progressive approach in their carbon reduction strategy.”

Solar Bay is a Renewable Energy Fund with a focus on contracted Distributed Energy Resources. Solar Bay Technologies include Solar PV, Battery Storage, waste to energy, Private Networks and Hybrid Power Plants. Typical investment size range between $500,000 – $30 million, with smaller per site capital deployment possible for multi-site rollouts.

Solar Bay was founded in 2016 with the goal of providing renewable energy solutions to commercial and industrial users. Solar Bay now owns and operates a diverse portfolio of Solar PV, Battery Storage and Off Grid Renewable IPP.

According to Solar Bay, buildings with solar power systems can typically export their surplus kilowatt-hours (kWh) to the grid, getting a power bill credit in exchange, however this credit is often far less than the retail price. Storing the excess energy in batteries for later use is therefore worthy of consideration.

Solar power systems become 2-3 times more expensive when batteries are added, but their potential savings are also enhanced. Each project is unique, and the best recommendation is getting a professional assessment to find the optimal capacity of the solar array and batteries.

The business case for batteries also improves when there is a local program that offers additional benefits. These can range from upfront rebates when purchasing batteries, to demand response programs that reward you for taking load off the power network.

There are several battery programs in Australia, which vary by state and territory. The following are some examples:

  • New South Wales offers an interest-free loan of up to $14,000 for homeowners who deploy a solar power system with batteries, and up to $9,000 for adding batteries to an existing installation.
  • Victoria offers a rebate up to $4,174 for homeowners who install battery systems combined with solar panels.
  • South Australia offers a battery rebate of up to $4,000 and the opportunity to participate in a virtual power plant (VPP). When battery owners join a VPP, they let the power company use their battery capacity in exchange for power bill credits.
  • The Australian Capital Territory (ACT) offers a battery rebate of $825 per kilowatt of power capacity, up to 30 kW (up to $24,750).

Incentives like these improve the business case for using batteries, either by reducing the upfront cost, or by increasing savings in the long run. The outlook improves further when expensive electricity is combined with battery incentives, which is the case in many parts of Australia.

Disclaimer: The information contained on this web site is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from a financial adviser.